Bursting Bubble

[Tyruscobb]

Originally Posted by JohnnyKilroy

This is absolutely incorrect. You are giving humans way too much credit. It’s a very basic economic principle... The more people you throw into this, the more people are involved that have no idea what they’re doing. They get sucked in because they see their friend, brother, sister, mother, etc.. crushing it. They see how easy people make it look to turn huge profits. It’s one of the main contributors to a bubble! It’s those same people that loose their shirt, or throw the towel in early, or cut losses and dump cards. Once the initial fear hits, that happens on a MASSIVE scale. I applaud you for having that kind of faith in man kind, but statistically it’s incorrect. And every single economic crash will show you that.

I agree. The increasing heard number only increases the heard mentally and its adverse effect when the selling starts.

[bmattioli]

Once people get their ass's back to work and stop pretend zooming all day while looking at E-Bay and other outlets spending money instead spend the day sitting in traffic jams thinking about the next vacation to spend their cash on will the bubble burst. Only my opinion..

[JohnnyKilroy]

Originally Posted by bmattioli

Once people get their ass's back to work and stop pretend zooming all day while looking at E-Bay and other outlets spending money instead spend the day sitting in traffic jams thinking about the next vacation to spend their cash on will the bubble burst. Only my opinion..

It’s one many agree with. That description fits me very well.

[philo98]

Originally Posted by bmattioli

Once people get their ass's back to work and stop pretend zooming all day while looking at E-Bay and other outlets spending money instead spend the day sitting in traffic jams thinking about the next vacation to spend their cash on will the bubble burst. Only my opinion..

Completely agree with this. I move Expats around the world and although it has nothing to do with the travel industry, occasionally information crosses over. The info I have is there is an enormous pent up demand for people to get out, travel, go to movies, sporting events, practically anything social, and once people are able to do this, they will spend more of their money and time away from the computer.

[joshuanip]

Originally Posted by Tyruscobb

I agree. The increasing heard number only increases the heard mentally and its adverse effect when the selling starts.

Herd aka crowd effect, is a signal that most of the entrants have jumped in the pool and are drinking the coolaid. But crowdedness doesn’t cause the bubble to pop. Bull markets don’t die of old age, they get murdered. The 2000 bubble popped because people were using relative price/sale valuations on companies with no earnings and poor fundamentals (like today’s SPACs). The 2008 financial crisis was caused by systemic risk in the financial system brought by greed and lipstick pigs, aka private-label, securitized liar loans.

This current bubble has shades of it all. The dot com valuations of 2000, the inflated home prices of 2008, and the possibility of a 70’s Nixon style inflation that killed the nifty fifty back in ‘73. Interesting that the nifty fifty, or the country’s fastest growing large caps is analogous to FANG/tech. Which is plausible as we move away from zero bound discount rates, impacting growth company valuations the most (as their terminal out year values are shrunk by a rising discount rate). If you were wondering why growth underperformed value (dividend/materials/energy/financials), this is why. This may not happen, we may continue to get a Goldilocks economy for a little longer because the economic disparity is creating a very unbalanced economy not conducive to sustained inflation. But the risk is still there.

Long winded way of saying herd mentality is a signal on how much juice is left to squeeze, but not necessarily for a top or end of the bull run. FOMO and herd mentality can last for a while - exemplified in this 12+ year bull run in the market.

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” - John Templeton

And yet I find it interesting outside of the MDs, none of the analysts have been around the last time there was a bear market...

[JohnnyKilroy]

Originally Posted by joshuanip

Herd aka crowd effect, is a signal that most of the entrants have jumped in the pool and are drinking the coolaid. But crowdedness doesn’t cause the bubble to pop. Bull markets don’t die of old age, they get murdered. The 2000 bubble popped because people were using relative price/sale valuations on companies with no earnings and poor fundamentals (like today’s SPACs). The 2008 financial crisis was caused by systemic risk in the financial system brought by greed and lipstick pigs, aka private-label, securitized liar loans.

This current bubble has shades of it all. The dot com valuations of 2000, the inflated home prices of 2008, and the possibility of a 70’s Nixon style inflation that killed the nifty fifty back in ‘73. Interesting that the nifty fifty, or the country’s fastest growing large caps is analogous to FANG/tech. Which is plausible as we move away from zero bound discount rates, impacting growth company variations the most (as their terminal out year values are shrunk by a rising discount rate). If you were wondering why growth underperformed value (dividend/materials/energy/financials), this is why. This may not happen, we may continue to get a Goldilocks economy for a little longer because the economic disparity is creating a very unbalanced economy not conducive to sustained inflation. But the risk is still there.

Long winded way of saying herd mentality is a signal on how much juice is left to squeeze, but not necessarily for a top or end of the bull run. FOMO and herd mentality can last for a while - exemplified in this 12+ year bull run in the market.

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” - John Templeton

Agree 100%. I view the heard mentality as an indicator that the “euphoria” is abundant. Doesn’t mean it’s the top and, like you said, could last for years. Nobody ever knows. But bulls / bears make money, pigs get slaughtered.